Tom Hanna's Lifestream

Unless we see a lot of surprises, this week is likely to be a mildly down one in terms of economic news. That's not likely to translate into any big downward moves in the the market which is in a sideways pattern at the moment. Negative surprises certainly could yield some downside and positive surprises could boost things, but moves are likely to be temporary and muted by the mood in this last week before a new economic team takes over in D.C. The week will kick off with what's likely to be a record drop in the Conference Board's Employment Trends Index. (Granted, the index is only a couple of years old.) International trade had been a bright spot for the last year as total trade and US exports both expanded, even when trade deficits total trade was growing faster. That pattern is out the window as exports will be flat to down. On the plus side, the lack of consumer spending has driven down imports and with them the trade deficit. And that lack of consumer spending will be the bad news for Wednesday when the Commerce Department reports on retail sales for December. With sales expected to be bad, one other indicator – business inventories – becomes more important. If businesses prepared for the worst and only got «sorta bad,» then inventories will be depleted and new orders to wholesalers and factories will start to rebound. A drop in the inventory to sales ratio would be a very good thing. This is also inflation, or maybe deflation, week with the Import Export Price Indexes out Wednesday, the PPI out Thursday and the CPI out Friday. While these are important numbers, the Federal Reserve is fighting hard agaisnt deflation and no remotely likely scenario for any of these numbers will change that fundamental fact. The same is really true of the normally vital Beige Book report, due out Wednesday from the Fed and the industrial production numbers due out Friday. All of these are important for medium term planning, but may not move markets much in the immediate term barring huge surprises. One market that may get a little volatile this week is oil. Some analysts are predicting that OPEC production cuts and other factors may boost prices, but there are still substantial signs of a supply glut and dropping demand in the US, the world's biggest oil consumer. Another week of inventory gains could reverse any price increases early in the week, while a substantial drop would reinforce OPEC moves. For the week as a whole prices may not move a lot, but there will be plenty of day-to-day action for traders to make money and lose their shirts.

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Indicators

Employment Trends Index from the Conference Board

International Trade for November from the Commerce Department Federal Budget for December from the Treasury Department Leading Index for the UK from the Conference Board Leading Index for the Korea from the Conference Board Weekly Redbook Retail Index

Beige Book from the Federal Reserve Board Retail Sales for December from the Commerce Department Business Inventories for November from the Commerce Department Import and Export Price Indexes from the Bureau of Labor Statistics Weekly Mortgage Applications Survey from the Mortgage Bankers Association Weekly Petroleum Inventory Report and This Week in Petroleum from the Energy Information Administration

December Produce Price Index (PPI) from the Bureau of Labor Statistics January Empire State Manufacturing Survey from the New York Federal Reserve Bank Leading Index for Spain from the Conference Board Weekly Jobless Claims report from the Employment and Training Administration Weekly Money Supply (M1 and M2) from the Federal Reserve Weekly Natural Gas Report from the Energy Information Administration

December Consumer Price Index (CPI) from the Bureau of Labor Statistics Treasury International Capital December Industrial Production from the Federal Reserve Bank

Treasury Auctions and Announcements

11 AM: 4-Week T-Bill Announcement 1 PM: 3-Month and 6- Month T-Bill Auctions

1 PM: 4-Week T-Bill Auction 1 PM: 52-Week T-Bill Auction

None

11 AM: 3-Month and 6-Month T-Bill Announcements

None

*See more information on the Financial Roadmap series here. Earnings reports are companies of interest, NOT recommendations.

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